Reputational damage resulting from media, consumer, or investor outcry often follows corporate scandals. For instance, notable oil spills, from Exxon’s 1989 Exxon Valdez disaster to BP’s 2010 Deepwater Horizon disaster, have resulted in both hundreds of millions of dollars in direct regulatory penalties as well as short-term stock market losses (Länsilahti 2012), substantial longer-term losses… Read More »
Motivation Banks collect deposits from households and allocate funds to borrowing firms in the real economy. Banks play two fundamental roles in fund allocation: selecting the best borrower from potential borrowers and monitoring them (Diamond 1984, 1991). The successful fulfillment of those two roles builds on a good bank governance system that aims to protect… Read More »
Why is it So Costly to Go Public? The average first-day returns to investors of initial public offerings (“IPOs”) in the U.S. is 19%. These returns are even higher elsewhere, such as in China. For reference, the S&P 500 index gains only a few basis points a day on average. While a large one-day return… Read More »
The views expressed in this blog post and the associated paper are solely those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Philadelphia, the Federal Reserve Board, or the Federal Reserve System. Any errors or omissions are the responsibility of the author. No statements here should be… Read More »
In a new paper, I examine changes in CEO labor market outcomes following corporate environmental misconduct, which creates negative externalities that firms are required by law to prevent. Corporate activities create significant negative environmental externalities. These economic costs can exceed $4.7 trillion a year, are multi-sectoral, and appear through the entire lifecycle of products. Externalities… Read More »
As a new species of cryptographic asset based on blockchain technology, the non-fungible token (NFT) became prominent and attracted attention from academia and practitioners. Unlike cryptocurrencies, which primarily serve as a medium of exchange, NFTs are blockchain-recorded digital assets that can be anything digital, e.g., images, videos, and songs. The NFT market reached its peak… Read More »
This post is a summary of a paper that was selected for inclusion at the inaugural Digital Assets at Duke Conference at Duke University on January 20 and 21. The past year was not a good one for crypto, with Sam Bankman-Fried’s massive fraud through FTX/Alameda, Do Kwon’s failed algorithmic stablecoin experiment (Terra Luna), and… Read More »
The antitrust world is changing. US agencies’ eyes are turning to finance, with the newest enforcement target being private equity (“PE”). Repeated public statements and speeches of US antitrust officials under the Biden administration clearly signal this policy shift. This is no surprise for Europe. The European Commission, confirmed by the Courts, has also recently… Read More »
Ransomware attacks have created havoc across a range of industries – including the cyber-insurance sector, where insurance premia are rocketing to cover soaring losses. Looking into the security failures on some of these attacks raises the question of whether insurers were too lax in their underwriting practices: How could firms obtain insurance without fulfilling even… Read More »
If you have ever wondered whether you paid a fair price for a flight ticket or an apparel piece, you are not alone. Customers are often concerned about paying higher than the “fair value” of products and services. The fair value, however, is subjective. While customers expect the products to be reasonably priced based on… Read More »